The Philippines garments and textile industry started from a cottage-type industry in the early ‘50s. From then, it has expanded, strongly positioning itself as the country’s leading non-traditional export. FromUS$36 million worth of garments and textiles exported in 1970, it has grown tremendously, reaching its first billion dollar in year 1987. The Philippines government and the private sector undertook aggressive joint marketing efforts that helped sustain the industry’s performance through the ‘90s despite the Asian crisis. In year 2000, the industry breached the three billion dollar mark.
Importance of the Industry to the Philippine Economy
The industry remains Philippines’ second biggest dollar earner, next to electronics. As of 2001, Philippines has exported garments and textiles to 110 countries, with some 200 manufacturers, 240 traders and 1,150 subcontractors contributing to the industry’s performance.
Philippines-made apparel has penetrated the high-end market and has been proudly displayed in prestigious department stores and retail outlets all over the world. The buyer profile of the industry has already shifted from “importers/mass retailers” to “brand holders” like GAP, Old Navy, Ann Taylor, Liz Claiborne and Polo Ralph Lauren. The Philippines is the first Asian country to implement social responsibility in manufacturing. This is being ensured through the Garments and Textiles Export Board (GTEB)’s Reaccreditation Program. Under this program, garment exporters are mandated to follow internationally accepted social and labor standards in manufacturing to meet the demands of the market for “clean clothes” (free from child labor, thrives in humane and ethical work conditions, allows freedom of association, etc.).
The Philippines has a highly skilled labor force. The Filipino workers are capable of making garments with complicated styles and intricate embroideries and designs, which are at par with the world’s best. There is a continuous streamlining of export and import procedures designed to improve the speed-to-market capability of manufacturers. Effective September 15, 2002, the “paperless visa” thru the Electronic Visa Information System (ELVIS) has been implemented. The quota allocation system has been enhanced thru computerization and streamlining of quota rules and procedures. Since the enhanced system allows minimal human intervention and discretion, it provides increased transparency and predictability. Industrial relations are no longer an issue and labor problems have been considered minimal in the industry. Leading Philippine garments and textile firms have been integrated. They manufacture good denims, twills and yarns for their own use and to supply other exporters.
There is a vast range of investment opportunities in garment production-related services such as sample making, fabric designing, pattern-making, washing, dying, printing and finishing. There is also an opportunity for investment in the commercial production of indigenous fibers such as banana, piña, abaca, ramie and silk, which are abundant in the Philippines.
Incentives offered to investors include:
- Income tax holidays.
- Additional deduction for incremental labor expenses during the first five years from registration.
- Tax and duty exemption from taxes and duties on imported spare parts when brought in through the firms’ own bonded manufacturing warehouses.
- Unrestricted use of consigned equipment.
- Employment of foreign nationals.
- Tax credit for imported raw materials used for the exported products.